Daily Gains Letter

big banks


This Top Stock a Poster Child for Consistency

By for Daily Gains Letter | Apr 17, 2014

My Top Stock for Long-Term Investors to Rest EasyThe chase for high-beta stocks appears to be fading at this juncture, as we are seeing a shift in the risk profile to lower-beta and more conservative large-cap stocks in the stock market.

After the staggering gains made by technology and small-cap stocks in 2013, it’s time to take a prudent approach to the stock market and refrain from chasing risk at this time.

We are seeing a move to consumer staples stocks that tend to fare reasonably well in both up and down stock markets.

While I favor small-cap stocks in an up stock market, the current tension in the stock market makes it dangerous to pursue risk. This is a time you need to be in defensive stocks.

The big banks, consumer staples, and industrial sectors look decent for those wanting to continue to invest at this time. Momentum and growth should be avoided for now.

If you are looking for a singular stock market play that offers diversity and a defensive approach, take a look at time-tested General Electric Company (NYSE/GE), which has offered investors steady returns in the majority of periods since its beginnings in 1892.

General Electric (GE) is precisely what you want in this type of market. It’s extremely well diversified across many industries and geographical areas around the world.

The company prides itself on producing steady results to shareholders. Its management strategy is to hire CEOs for 20-year time spans that allow for stability.

GE is the poster child for consistency in corporate America.

The company isn’t going to make you rich in a short period of time in the stock market, but … Read More


How the Debt Fiasco Will End for Long-Term Investors

By for Daily Gains Letter | Sep 24, 2013

Long-Term InvestorsThe financial crisis struck the U.S. economy five years ago. Those who remember the collapse of Lehman Brothers know how much uncertainty was actually there. It seemed the U.S. economy was going to halt and the financial system would collapse. Ripples across the global economy were felt. Nothing looked safe—it was a total bloodbath. Investors had many questions, including if they would be able to protect their nest eggs.

As a result of all this, to fight the uncertainty and handle the issues at hand, the U.S. government and the central bank jumped in and started to spend. They bailed out the big banks in the U.S. economy to make sure everything would continue to run smoothly. We passed through that successfully, and the worst didn’t come upon us.

Sadly, as all this happened, we saw troubling trends starting to form in the U.S. economy.

Look at the national debt.

As the government started to rev up its spending spree, it posted a budget deficit and eventually borrowed money. To give you some idea, in January of 2008, when the behemoth was starting to awaken, the national debt of the U.S. economy stood at $9.2 trillion. Fast-forwarding to now, it stands at $16.7 trillion. Simple math suggests this is an increase of more than 81%. (Source: “The Daily History of the Debt Results,” Treasury Direct web site, last accessed September 20, 2013.)

Unfortunately, it doesn’t end here. Not too long ago, Treasury secretary Jack Lew sent a letter to the U.S. government saying that if they don’t increase the national debt limit currently in place by October, the U.S. economy … Read More


Two Tips for Making Your Profits Rise as Lending Declines

By for Daily Gains Letter | May 1, 2013

Profits Rise as Lending DeclinesAccording to the Federal Reserve’s data compiled by Barclays PLC, in the first quarter of 2013, total consumer loans at the biggest U.S. banks fell 0.6%; they declined 0.2% at the smaller banks. (Source: Fitzpatrick, D. and Raice, S., “Drop in Borrowing Squeezes U.S. Banks,” Wall Street Journal, April 25, 2013.)

Similarly, business lending in the U.S. economy is weak, as well. In the first two weeks of April, outstanding loans by the big banks to U.S. companies declined nine percent when compared to the end of March. In the first quarter, lending to businesses only increased 2.7%.

Why does it really matter?

To say the very least, consumers and businesses shying away from borrowing suggests the U.S. economy may be heading towards an economic slowdown. This is mainly because the U.S. economy is dependent on consumer spending, as it makes up more than 70% of the gross domestic product (GDP).

In times of economic growth, consumers have jobs for the near future, and they are able to spend and borrow for things they want. Likewise, when consumers are spending, businesses need to meet the demand, and as a result, they borrow to either invest in new plants or buy new equipment.

Next, this phenomenon of consumers and businesses not borrowing shows that big banks can run into troubles ahead. At their very core, banks are in the business of lending; they take deposits from their customers—those who save—and lend them to others. Less borrowing from customers will eventually shake their core business, forcing them to cut costs to stay profitable.

As bad as these situations may sound, investors actually … Read More